Tort damages betterment investing
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It reviews the broad principles of recovery in tort claims pertaining to buildings, and addresses Canadian jurisprudence on how to calculate damages in the context of residential and commercial buildings, recreational property, and buildings that have essentially reached the end of their useful lives. Building code upgrade costs are generally recoverable, subject to the overriding condition that the award as a whole must be reasonable.
This principle is often referred to as restitutio in integrum. The principle, in the context of damages for buildings, is subject to a caveat — the compensation awarded must be reasonable to both the plaintiff and defendant. Though it may be reasonable to award a plaintiff the entire cost of reinstating a new building destroyed by fire, it may not be reasonable to make the same award in the context of a building that the plaintiff had at the time of the fire already slated for imminent demolition.
The extent of damages awarded is variable and that every case will turn on its own particular facts. Nan v. Black Pine The general principles of restitutio in integrum and reasonableness are underscored in the leading Canadian case of Nan v.
Black Pine Manufacturing Ltd.. Nan was concerned with the amount of recovery available subsequent to a fire. The defendant argued that any award in excess of that number would result in the plaintiff being in a better position than he would have been had the tort not occurred. Prior to Nan, courts generally awarded damages for damage to buildings based on the actual value of the property damaged. In Nan however, the court reaffirmed the general principle of restitution and awarded the plaintiff the full cost of replacing his home.
The trial judge awarded as damages the full cost of reinstatement. On the issue of betterment the majority Lord Denning, M. In my opinion, there is only one answer. It undoubtedly was. They had, in effect, lost their family home. That is the nature of their damage and not some diminution in the value of their land. Fair compensation requires that they be given back what they had before; and the only way in which that purpose can be achieved is to award them the sum reasonably necessary to restore their property to the condition in which it was before the defendants effectively destroyed it.
This the learned judge did; and, in my opinion, he was right. It is not to the point that the diminution in value basis might on one view produce no damages, while the reinstatement basis produces a substantial sum. The disproportion in question in cases of this kind are not always to be revealed by arithmetical comparison.
The cost to a defendant of competing measures is a significant factor. If that turns out to be more expensive than another, the wrongdoer has no one but himself to blame. In my view the learned judge below was right when she held that it was appropriate to award the respondent the full amount of the cost of replacing his home, without deduction for either pre-loss depreciation or post-reinstatement betterment.
Carrel v. Implicitly, the court held that reinstatement was reasonable because: a the plaintiff had little choice but to repair, given her long occupancy of the property; and b the plaintiff should not be burdened with financing costs for any difference between depreciated value and reinstatement costs.
Canlan Ice Sports Corp. The defendant also noted in its argument that no by-law or other legal imperative required the installation of a rain screen envelope. The last item, the upgrade in the wall assembly would not be apparent to anyone viewing the building. The stucco repair was not an enhancement, but simply introduced the air space necessary to make the application functional. Fors v. The plaintiff claimed his costs for remediating significant water problems and septic tank leaks.
The defendants argued that the plaintiff would receive considerable betterment if they recovered the cost of a newly designed roof and a new septic system, as their existing systems only had a few years of functional life remaining. The court concluded that it would be inequitable to reduce damages based on speculation. Furthermore, the defendants provided no evidence that the value of the house was enhanced with the remediated septic system or that had the plaintiff would have paid more for the house if the remediation work had been carried out prior to their purchase.
Fors highlights the importance of evidence to prove an allegation of betterment. Specifically, a defendant must prove that the betterment goes above what is necessary to simply remediate the defects or damages, and that the plaintiff has experienced an increase in the value of the property.
Commercial Property a. James Street Hardware v. Spizziri In James Street, the Ontario Court of Appeal applied the aforementioned general principles of restitutio and reasonableness, but arrived at a different conclusion with respect to compensating the plaintiff for the loss of its commercial retail building. The only reasonable course will be to replace with a new roof.
If roofs have a life of twenty years, and the defendant is compelled to pay the full cost of the replacement, the plaintiff will be in a better position after satisfaction of the judgment than if the damage had not occurred in the first place. These arguments, however, do not appear to be conclusive. The fact that the defendant is a wrongdoer is not sufficient reason for over-compensation. We add the reservation that, where the plaintiff alleges a loss with respect to being required to make an unexpected expenditure, the onus of proof with respect to it should lie on him or her.
Prince George v. Rahn Bros. Prince George dealt with the damages available to the defendant on its counter-claim for negligent issuance of a building permit. In the city realized it had made a zoning error in issuing the building permits and obtained an injunction preventing the defendant from operating on its lands. At trial, the defendant testified that had the city not been negligent it would have built on other lands properly zoned for its purposes.
The defendant sought damages for the estimated cost to replace its building and facilities, but the trial judge found that unreasonable because the defendant failed to prove it would actually rebuild, given the downturn in the logging industry. The trial judge awarded damages for the original cost of construction, adjusted for inflation and reduced by the useful life of the building and facility already expended. The award, in essence, was for the depreciated value of the building and facility adjusted for increased construction costs.
On appeal, the court found that the trial judge failed to give effect to the restitutio in integrum principle by requiring the defendant to prove it would rebuild, rather than assessing the chances that it would do so. Helicopter Exploration Co. The defendants later breached the contract by hiring another person to provide the service the plaintiff had contracted to perform. In assessing damages, Justice Rand noted the plaintiff could have purchased shares so as to mitigate the loss.
The Court ruled it would be no answer that the plaintiff was not, at the time, financially able to buy them. For instance, in Stewart v. Industrial Acceptance Corp. At time of seizure, the plaintiff was under contract to perform logging operations, but this contract terminated, as the plaintiff was financially unable to purchase replacement equipment.
In Cash v. Georgia Pacific Securities Corp. The defendant argued the plaintiff should not be awarded the full amount of his losses because he should have mitigated by purchasing replacement shares. The plaintiff argued he could not afford to do so. Johnson, NSCA 99 at para. Betterment The guiding principle in any tort case is restitution in integrum — to place the injured party in the same position that it would have been in if the damage had not occurred. Thus, the appropriate measure of compensation for negligent damage is the difference in value immediately before and immediately after the damaging act.
There can be difficulties in deciding between awarding damages for either how much a property has diminished in value or how much it would cost to replace the property in order to put the injured party back in their original position. For example, the injured party may want his property in the same state before the tort occurred, but the amount necessary for this to occur is substantially greater than the amount that the property has depreciated in value.
At page , Lord Denning explained: The destruction of a building is different from a chattel. If a second-hand care is destroyed, the owner only gets its value; because he can go into the market and get another second-hand car to replace it. He cannot charge the other party with the cost of replacing it with a new car. But when this mill was destroyed, the plasticine company had no choice. They were bound to replace it as soon as they could, not only to keep their business going, but also to mitigate the loss of profit for which they would be able to charge the defendants.
They replaced it in the only possible way, without adding any extras. I think they should be allowed the cost of replacement. True it is that they got new for old; but I do not think the wrongdoer can diminish the claim on that account. If they had added extra accommodation or made extra improvements, they would have to give credit.
But that is not the case. Spizziri et al. As the Building Code Act prohibited the restoration of the building to its pre-fire condition, the plaintiff repaired and significantly improved the entire building. The plaintiff appealed an order wherein the trial judge reduced its damages on account of betterment. In support of its position, the plaintiff argued that the trial judge ought to have followed the approached applied by Lord Denning.
At para. The only reasonable course will be to replace with a new roof. If roofs have a life of twenty years, and the defendant is compelled to pay the full cost of the replacement, the plaintiff will be in a better position after satisfaction of the judgment than if the damage had not occurred in the first place. These arguments, however, do not appear to be conclusive. The fact that the defendant is a wrong doer is not sufficient reason for over-compensation.
It is suggested, therefore, that an anticipated benefit accruing to the plaintiff on repairing damaged property ought to be taken into account to reduce damages, with compensation, however, for the cost to the plaintiff of the unexpected expenditure required of him, and with the onus of proof upon the defendant in case of doubt on this question, or on the value of the benefit. The Court then explained, at para, Quite simply, if a plaintiff, who is entitled to be compensated on the basis of the cost of replacement, is obligated to submit to a deduction from that compensation for incidental and unavoidable enhancement, he or she will not be fully compensated for the loss suffered.
Widgery L. As Waddams suggests, the answer lies in compensating the plaintiff for the loss imposed upon him or her in being forced to spend money he or she would not otherwise have spent — at least as early as was required by the damages occasioned to him by the tort.
In general terms, this loss would be the cost if he has to borrow or value if he already has the money of the money equivalent of the betterment over a particular period of time. Lawrence Cement Inc. Black Pine Manufacturing Ltd. The house was completely rebuilt and the plaintiff was awarded the full replacement cost of the house. The Court explained that the cost of replacement is the starting point in assessing damages, particularly where a residential home is concerned.
However, the Court explained that while replacement cost is a starting point, an assessment of betterment will depend on the peculiar facts of each case. On this point, the Court explained: Whether or not the damages based on such costs should then be adjusted, either for pre-loss depreciation or post-reinstatement betterment, will depend on what is reasonable in the circumstances.
No rules can be fashioned by which it can invariably be determined when such allowances should be made. It must, in all cases, turn on the facts peculiar to the case being considered. Moreover, the Court suggested that commercial nature of a property may be a factor in considering whether a deduction for betterment should apply. Rahn Bros. Logging Ltd. There, the Court of Appeal clarified that Nan should be construed narrowly and only to residential buildings and therefore distinguished Nan from the case before it as the property in question was purely commercial in nature.
Full replacement costs have typically been awarded when the property has been unusual or unique. For example, in Forsyth v. Sikorsky Aircraft Corp. The plaintiff sought to recover the replacement cost of the helicopter and the defendant argued that the market value of the helicopter on the date of the loss should determine the extent of damages.
However, the plaintiffs had modified the damaged helicopter to enable it to perform heli-logging operation, which increased the cost. Subsequently, replacement costs were awarded for the helicopter. An award of replacement costs can also be justified in circumstances where there is no market value for the property destroyed.
In Goodyear Canada Inc. Wall Beresford Holdings Ltd. Industrial Machinery Movers  O. The plaintiffs converted a machine from one already in their warehouse, although the added costs to make the enhanced machine were relatively minimal.
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